Northern District of Texas Orders Patent Royalty Dispute to Arbitration

The Northern District of Texas in Dallas has ordered a patent royalty dispute to arbitration. In Sazy v. DePuy Spine, LLC, No. 3:13-CV-4379-L (N. D. Tex., Sept. 18, 2014), a Texas physician entered into a Product Development Agreement (“PDA”) with several related corporations (“DePuy”) in early 2002. The agreement contained a Supplementary Agreement that outlined the circumstances under which the doctor could earn royalties if the proposed surgical mesh product became sold commercially. The PDA also contained an agreement to arbitrate any disputes “arising out of or relating to” the contract. About one year after the parties executed the PDA, the physician began to receive royalties for the mesh product.

In 2003, the parties executed an amendment to the PDA after DePuy developed a related product. The amendment provided the doctor with reduced royalties for five years and changed the definition of the term “patent” in the agreement. Despite this, the physician received the higher royalty rate included in the original PDA until January 2011. In September 2013, the doctor filed a lawsuit alleging breach of contract and other claims against DePuy in a Texas state court. The corporation removed the case to federal court before filing a motion to stay the proceedings and compel the parties’ dispute to arbitration.